Brand equity

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Brand equity is a phrase used in the marketing industry which describes the value of having a well-
known brand name, based on the idea that the owner of a well-known brand name can generate more
money from products with that brand name than from products with a less well known name, as
consumers believe that a product with a well-known name is better than products with less well-known
names.[1][2][3][4]

Some marketing researchers have concluded that brands are one of the most valuable assets a company
has,[5] as brand equity is one of the factors which can increase the financial value of a brand to the
brand owner, although not the only one.[6] Elements that can be included in the valuation of brand
equity include (but not limited to): changing market share, profit margins, consumer recognition of logos
and other visual elements, brand language associations made by consumers, consumers' perceptions of
quality and other relevant brand values.

Consumers' knowledge about a brand also governs how manufacturers and advertisers market the
brand.[7][8] Brand equity is created through strategic investments in communication channels and
market education and appreciates through economic growth in profit margins, market share, prestige
value, and critical associations. Generally, these strategic investments appreciate over time to deliver a
return on investment. This is directly related to marketing ROI. Brand equity can also appreciate without
strategic direction. A Stockholm University study in 2011 documents the case of Jerusalem's city
brand.[9] The city organically developed a brand, which experienced tremendous brand equity
appreciation over the course of centuries through non-strategic activities. A booming tourism industry in
Jerusalem has been the most evident indicator of a strong ROI.

Brand equity is strategically crucial, but famously difficult to quantify. Many experts have developed
tools to analyze this asset, but there is no universally accepted way to measure it. As one of the serial
challenges that marketing professionals and academics find with the concept of brand equity, the
disconnect between quantitative and qualitative equity values is difficult to reconcile. Quantitative
brand equity includes numerical values such as profit margins and market share, but fails to capture
qualitative elements such as prestige and associations of interest. Overall, most marketing practitioners
take a more qualitative approach to brand equity because of this challenge. In a survey of nearly 200
senior marketing managers, only 26 percent responded that they found the "brand equity" metric very
useful.[10]